Ahmedabad, Kolkata rank top among India’s 8 most affordable housing markets

Ahmedabad, Kolkata and Pune are among the most affordable housing markets among major cities in the country, revealed Knight Frank India’s property Affordability Index 2023. Despite rising interest rates, the property markets in these three cities remain affordable with the average EMI accounting for 23-26 per cent of the monthly income of a household. On the other hand, Mumbai still tops the chart as the most expensive housing market in the country with the average EMI being around 55 per cent of the average monthly income of the residents. Other expensive real estate markets in the country include Hyderabad and Delhi-NCR.

Key findings of Knight Frank India Affordability Index 2023

Knight Frank India has tracked property prices across India since 2010 in its index and has seen steady improvements in terms of real estate affordability. However, given the recent repo rate hikes from the Reserve Bank of India, the interest rates on loans like home loans have also gone up. This has meant EMI payments have become dearer across India. With a 250 bps hike in repo rates, the average affordability of houses across cities has also risen by 2.5 per cent and the EMI load by 14.1 per cent. However, despite the increase the demand for housing has remained unabated.

The index assumes loan tenure of 20 years and loan to value of 80 per cent with average interest rates. The price of housing was calculated by taking the median, not average, house prices in the city.

Most and Least Affordable

At 23 per cent EMI to income ratio, families in Ahmedabad are spending 23 per cent of their monthly income on their house loan EMIs. This makes Ahmedabad the most affordable housing market across major cities in India. Pune and Kolkata follow behind with a ratio of 26 per cent. State capitals like Chennai and Bengaluru are slightly more expensive with a 28 per cent EMI to income ratio.

When it comes to the Delhi and National Capital Region which includes Gurgaon and Noida, the homebuyers pay more compared to other cities. Here the EMI to income ratio stands at 30 per cent, which means that the average home buyer is spending just under a third of their salary on just EMIs for home loan. The situation in Hyderabad is similar with an EMI to income ratio of 31 per cent.

Mumbai, however, has by far remains the most unaffordable housing market in the country with an EMI to income ratio of a whopping 55 per cent, though it is a drastic improvement from the 93 per cent ratio noted in 2010. An EMI to income ratio of 50 per cent is considered affordable, with financial institutions rarely underwriting loans in such cases.